What is meant by the term rate of interest? If the nominal rate ...

[Alygatorr01285]

What is meant by the term rate of interest? If the nominal rate of interest in an economy is 6, and the rate of inflation in the economy is 4, what is the real rate of interest in the economy?
 
  What will be an ideal response?

Question 2

Which of the following is likely to happen if the quantity of bank reserves held at the Fed increases?
 
  A) The stock of money in the economy increases. B) The number of loans issued by banks decrease.
  C) Bank deposits decrease. D) The real interest rate increases.

[essyface1]

Answer to Question 1

The rate of interest is the additional payment a borrower has to make on a one-dollar loan typically at the end of a year.
The real rate of interest = nominal rate of interest - inflation rate  the real rate of interest = 2.

Answer to Question 2

A

[Alygatorr01285]

Thank you

[essyface1]

Happy to help you